Draft Regulatory Rules and Procedures issued pursuant to the
Companies Law
Arabic is the official language of the Capital Market Authority
The current version of these Regulations, as may be amended, can be found at
the Authority website: www.cma.org.
TABLE OF CONTENTS
Page
CHAPTER ONE PRELIMINARY PROVISIONS ............................................................... 1
Article one: ......................................................................................................... 1
CHAPTER TWO REMUNERATIONS OF BOARD MEMBERS IN JOINT
STOCK COMPANIES ................................................................................................. 3
Article two:......................................................................................................... 3
Article three: ...................................................................................................... 3
Article four: ....................................................................................................... 3
Article five:......................................................................................................... 3
Article six: .......................................................................................................... 4
Article seven: ..................................................................................................... 4
CHAPTER THREE HOLDING OF GENERAL ASSEMBLY MEETINGS OF
JOINT STOCK COMPANIES AND SHAREHOLDERS’
PARTICIPATION THEREIN THROUGH CONTEMPORARY
TECHNOLOGY............................................................................................................ 5
Article eight: ...................................................................................................... 5
Article nine: ....................................................................................................... 5
Article ten: ......................................................................................................... 5
Article eleven: .................................................................................................... 5
CHAPTER FOUR BUY-BACK OF JOINT STOCK COMPANIES’ SHARES ................ 6
Part One Share Buy-back Rules .................................................................................. 6
Article twelve: .................................................................................................... 6
Article thirteen: ................................................................................................. 6
Article fourteen: ................................................................................................ 7
Article fifteen: .................................................................................................... 7
Article sixteen: ................................................................................................... 7
Article seventeen: .............................................................................................. 7
Article eighteen:................................................................................................. 8
Article nineteen: ................................................................................................ 8
Article twenty: ................................................................................................... 8
Part Two Effect of a Buy-back Transaction ............................................................... 8
Article twenty one: ............................................................................................ 8
Article twenty two: ............................................................................................ 8
Article twenty three: ......................................................................................... 8
Article twenty four: ........................................................................................... 8
Part Three Rules of Sale and Pledge of Treasury Shares ......................................... 9
Article twenty five: ............................................................................................ 9
Article twenty six:.............................................................................................. 9
Article twenty seven: ......................................................................................... 9
Part Four Employees’ Shares .................................................................................... 10
Article twenty eight: ........................................................................................ 10
CHAPTER FIVE PLEDGE OF JOINT STOCK COMPANIES’ SHARES .................... 11
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Part One Share Pledge Rules ..................................................................................... 11
Article twenty nine: ......................................................................................... 11
Article thirty: ................................................................................................... 11
Part Two Pledge Agreement and its Registration .................................................... 11
Article thirty one: ............................................................................................ 11
Article thirty two: ............................................................................................ 11
Article thirty three: ......................................................................................... 13
Article thirty four: ........................................................................................... 13
Article thirty five: ............................................................................................ 13
Part Three Selling and Foreclosing the Pledge ........................................................ 13
Article thirty six: ............................................................................................. 13
Part Four General Provisions .................................................................................... 14
Article thirty seven: ......................................................................................... 14
CHAPTER SIX ISSUANCE, BUY-BACK AND CONVERSION OF
PREFERRED SHARES BY JOINT STOCK COMPANIES ................................. 15
Part One Rules of Issuance, Buy-Back and Conversion of Preferred
Shares ............................................................................................................... 15
Article thirty eight:.......................................................................................... 15
Article thirty nine: ........................................................................................... 15
Article forty: .................................................................................................... 15
Article forty one: ............................................................................................. 16
Article forty two: ............................................................................................. 16
Article forty three: .......................................................................................... 16
CHAPTER SEVEN SALE OF SHARES THROUGH PUBLIC AUCTION OR
THE EXCHANGE IN CASE OF FAILURE OF A SHAREHOLDER TO
PAY THE VALUE OF THE SHARES ON TIME .................................................. 17
Article forty four: ............................................................................................ 17
Article forty five: ............................................................................................. 17
Article forty six: ............................................................................................... 17
Article forty seven: .......................................................................................... 17
CHAPTER EIGHT DIVIDEND DISTRIBUTION TO SHAREHOLDERS OF
JOINT STOCK COMPANIES .................................................................................. 18
Part One Timing of Payment of Dividend ................................................................ 18
Article forty eight: ........................................................................................... 18
Part Two Interim Dividend Distribution .................................................................. 18
Article forty nine: ............................................................................................ 18
Article fifty: ...................................................................................................... 18
Article fifty one: ............................................................................................... 18
Article fifty two: .............................................................................................. 18
CHAPTER NINE ISSUANCE AND SALE OF PRE-EMPTIVE RIGHTS
RESULTING FROM CAPITAL INCREASE ......................................................... 20
Part One Definition of Pre-emptive Rights ............................................................... 20
Article fifty three: ............................................................................................ 20
Article fifty four: ............................................................................................. 20
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Part Two Process of Trading of Pre-emptive Rights ............................................... 20
Article fifty five: .............................................................................................. 20
Part Three Options Available to Registered Shareholders and New
Investors ........................................................................................................... 21
Article fifty six: ................................................................................................ 21
Article fifty seven: ........................................................................................... 21
Part Four Pre-emptive Rights’ Indicative Value ..................................................... 22
Article fifty eight: ............................................................................................ 22
CHAPTER TEN PROXY PROCEDURES FOR ATTENDING GENERAL OR
PRIVATE ASSEMBLIES .......................................................................................... 23
Article fifty nine: ............................................................................................. 23
Article sixty: ..................................................................................................... 23
Article sixty one: .............................................................................................. 24
Article sixty two:.............................................................................................. 24
Article sixty three: ........................................................................................... 24
Article sixty four: ............................................................................................ 24
Article sixty five:.............................................................................................. 24
Annex (1) ...................................................................................................................... 25
Annex (2) ...................................................................................................................... 26
Annex (3) ...................................................................................................................... 27
Annex (4) ...................................................................................................................... 28
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Chapter One
Preliminary Provisions
Article one:
a) These rules shall not prejudice the provisions of the Companies Law, the Capital
Market Law, and their implementing regulations and other relevant rules and
regulations.
b) Unless the context otherwise indicates, the following words and phrases, whenever
they appear in these rules, shall have the meaning herein specified:
 Shares: shares of joint stock companies.
 Treasury Shares: Purchased Shares which are retained by the Company.
 Employees’ Shares: Purchased Shares which are allocated by the Company to its
employees.
 Purchased Shares: shares bought back by the Company pursuant to Article 112 of
the Companies Law.
 Preferred Shares: shares issued by the Company which entitle its holders the right to
receive a higher percentage of the Company’s net profits, after setting aside the
statutory reserve, without entitling its holders to vote in the General Assembly.
 General Assembly: the general assembly held with the attendance of the
shareholders of the Company pursuant to the provisions of the Companies Law and
the Company’s bylaws.
 Competent Authority: the Ministry of Commerce and Industry in respect of nonlisted Companies and the Capital Market Authority in respect of listed Companies.
 Shareholders Register: a register of shareholders prepared by the non-listed
Company (or by a third party contracted to do so) which includes names of
shareholders, their nationality, place of residence, professions, number of Shares
owned and paid up amount of such Shares, and in which all relevant dealings related
to the issued Shares are recorded.
 Exchange : the Saudi Stock Exchange.
 Authorised Person: a person who is authorised to carry on securities business by the
Authority.
 Company: a joint stock company.
 Solvency Requirements: requirements that have to be satisfied – among others –
prior to the Company buying-back or mortgaging its Shares:

the Company must have, on its own or with its subsidiaries, sufficient working
capital for the twelve (12) months immediately following the date of completion
of the share buy-back or mortgage transaction.

the value of the Company’s assets must not be less than the value of its liabilities
(including contingent liabilities), prior to and following the payment of the
purchase price, according to the latest reviewed interim financial statements or
audited annual financial statements, whichever is more recent.
Listing Rules: the Listing Rules issued by the Board of the Authority.
Depository Centre Regulations: the Securities Depository Centre Regulations approved by
the board of the Authority.
Senior Executives: the Company’s management who propose and implement strategic
decisions including the chief executive officer, his deputies, and the chief financial officer.
Corporate Governance Regulations: the Corporate Governance Regulations for joint- stock
companies issued by the Ministry in respect of non-listed Companies and by the Authority in
respect of listed Companies
Remuneration Committee: a committee formed pursuant to the provisions of the Corporate
Governance Regulations.
Board: the Company’s board of directors.
Registered Shareholders: the shareholders registered in the Company’s records at the end of
the day on which the extraordinary General Assembly’s meeting is held to approve the
increase of the Company’s share capital and issuance of related new shares.
Remunerations: amounts, allowances, profits and their equivalent, periodic and annual
performance-related bonuses, short and long term incentive plans, in addition to any other inkind benefits.
Enforcement Law: the Enforcement Law issued by Royal Decree No. M/53 dated
13/8/1433H.
Capital Market Law: the Capital Market Law issued by Royal Decree No. M/30 dated
2/6/1424H.
Companies Law: the Companies Law issued by Royal Decree No. M/3 dated 28/1/1437H.
Depository Centre: the Securities Depository Centre.
Ministry: the Saudi Arabian Ministry of Commerce and Industry.
Authority: the Capital Market Authority.
Day: a working day.
Calendar Day: any day, whether a working or non-working day.
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Chapter Two
Remunerations of Board Members in Joint Stock Companies
Article two:
A. In addition to the relevant provisions of the Companies Law and the Corporate
Governance Regulations, when determining and paying Remunerations of each Board
member, the Board must comply with the following standards:
1. the Remuneration must be fair and proportionate to the Board member’s
experience, expertise and independence, the activities carried out and
responsibilities borne by each Board member, in addition to the objectives set out
by the Board to be achieved during the financial year;
2. the Remuneration must be based on the recommendation of the Remuneration
Committee;
3. the Remuneration must be proportionate to the Company’s activities and the
required skills and expertise for tis management;
4. taking into consideration the sector in which the Company operates, its size and
experience of its Board members; and
5. the remuneration must be reasonably sufficient to attract and retain highly
qualified and experienced Board members.
B. Board members shall not vote on the agenda item relating to the Remuneration of
Board members at the General Assembly’s meeting.
Article three:
A Board member may receive a Remuneration for his/her membership in committees formed
by the Board pursuant to the Company’s Corporate Governance Code, for any additional
executive, technical, managerial or consultative duties or positions carried out by the Board
member, and such Remuneration should be in addition to the Remuneration he/she may
receive in his/her capacity as a Board member pursuant to the Companies Law and the
Company’s bylaws.
Article four:
The Remunerations of different Board members may vary depending on the Board members’
experience, expertise, independence and number of Board meetings he/she attended in
addition to other considerations. The Remuneration of independent Board members shall be a
fixed amount and not a percentage of the profits to ensure the neutrality of their decisions.
Article five:
If the General Assembly decides to terminate the membership of any Board member who
fails to attend three consecutive Board meetings without a legitimate excuse, then such Board
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member shall not be entitled to any Remuneration since the last Board meeting he/she failed
to attend, and he/she shall pay back any Remuneration he/she received for that period.
Article six:
The company may request that all Remuneration paid to any Board member be returned to
the Company, if it is evidenced that such Remuneration was paid based on false and
misleading information presented to the General Assembly or included in the annual Board
report.
Article seven:
The Board must disclose in its annual report details of the Remuneration policies, and
mechanisms for determining such Remuneration, including amounts in cash and in-kind
benefits paid to each Board member in exchange for any executive or non-executive work or
positions, in accordance with the relevant provisions of the Corporate Governance
Regulations and Listing Rules.
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Chapter Three
Holding of General and Special Assembly meetings of Joint Stock Companies and
Shareholders’ Participation therein through Contemporary Technology
Article eight:
Contemporary technology may be used to hold General Assembly and special assembly
meetings, allow shareholders to review agendas of such meetings and related documents,
participate in its deliberation and vote on its resolutions, in accordance with the following
rules:
1. the participation at the General Assembly must be through instant video and audio
transmission;
2. the participation must be through a live connection between the Company and the
shareholders, which shall allow the shareholder to actively and instantaneously
participate in the General Assembly or special assembly, in a manner that allows the
shareholders to listen to and examine proposals, provide opinions and discuss and
vote on resolutions;
3. electronic voting must allow shareholders to cast their votes, whether before or during
the General Assembly or special assembly meeting, without the need to appoint a
proxy to attend such meetings on their behalf; and
4. electronic voting on the agenda of any general or special assembly meeting, shall not
commence prior to more than three (3) days from the date of the meeting.
Article nine:
If contemporary technology is used in General Assembly or special assembly meetings, the
Board must establish the rules and guidelines for checking the identity of the shareholder who
votes electronically or participates in General Assembly or special assembly meetings.
Article ten:
The attendance and votes of shareholders who participate in General Assembly or special
assembly meetings by means of contemporary technology are counted towards the quorum
required for a validly held meeting of the General Assembly or special assembly.
Article eleven:
Without prejudice to Article 91 of the Companies Law, the Company may send General
Assembly or special assembly meeting invitations through means of contemporary
technology.
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Chapter Four
Buy-back of Joint Stock Companies’ Shares
Part One
Share Buy-back Rules
Article twelve:
The Company may, if so provided and permitted in its bylaws, buy-back its ordinary or
preferred shares, in accordance with the following rules:
1. the purpose of the share buy-back shall be to either reduce the Company's capital or to
acquire Treasury Shares;
2. purchased Shares owned by the Company, must not at any time exceed 5% of the total
Shares in the class of Shares subject of the buy-back;
3. the Company must satisfy the Solvency Requirements pursuant to a report issued by
the Company’s auditor, which shall confirm that the Company meets such
requirements; and
4. the extraordinary General Assembly must approve the share buy-back transaction and
determine the maximum number of Shares subject of the buy-back and its purposes,
and the extraordinary General Assembly must also authorise the Board to finalise the
buy-back transaction, in one or several phases, within a maximum period of twelve
(12) months from the date of the above mentioned extraordinary General Assembly’s
resolution. The Company must announce the approval of the buy-back transaction and
its conditions, immediately after the relevant resolution of the extraordinary General
Assembly is issued.
Article thirteen:
A Company that is listed on the Exchange must comply with the following additional rules
when buying-back its ordinary Shares or Preferred Shares:
1. The purchase price of the Shares must not exceed:
a) 5% of the closing price on the day preceding the day the share buy-back
transaction is executed; and
b) the highest sale price offer of the Shares on the Exchange or price of the last
purchase transaction executed on the Exchange.
2. The buy-back transaction must not cause the ownership of the public in Shares of the
same class to decrease to less than 30% or any other percentage specified in the
prospectus approved by the Authority. In addition, Treasury Shares and Employees’
Shares do not count towards the ownership of the public.
3. A Company shall not buy-back or sell it Shares within the last thirty (30) minutes of
the a trading session.
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4. A listed Company shall not have a purchase order in place while selling Shares or a
sale order in place while purchasing Shares.
5. A Company shall not sell or buy-back its Shares during the following periods:
a) the fifteen (15) calendar days preceding the end of the financial quarter and until
the date of the Company’s announcement of its reviewed interim financial
statements; and
b) the thirty (30) calendar days preceding the end of the financial year and until the
date of the Company’s announcement of its reviewed interim financial statements
or its audited annual financial statements.
Article fourteen:
A Company may not buy-back its shares as Treasury Shares except for the following
purposes:
a) If the Board or its authorised representative, considers that the Share price on the
Exchange is lower than its fair value.
b) To pay a Company’s outstanding debt.
c) Share swap transactions for the acquisition of company's shares or stakes, or an
asset purchase.
d) To allocate them to Company’s employee as part of an Employees’ Shares plan.
Article fifteen:
A listed Company must notify the Authority – through the means determined by the
Authority – of the buy-back transaction at least two hours prior to the start of the trading
session on the day following the relevant buy-back transaction.
Article sixteen:
A listed Company must notify the public of the buy-back or the sale of its Shares at least half
an hour prior to the start of the trading session on the day following the completion of the
buy-back transaction, if made through the Exchange.
Article seventeen:
A listed Company must execute the buy-back or sale of its Shares through one portfolio held
by an Authorised Person, in accordance with the following:
1. buy-back or sale of Shares transactions must not exceed 10% of the total quantity
approved for buy-back by the General Assembly in one trading day;
2. the execution period of such transaction must not exceed ninety (90) Calendar Days
from the commencement date of the first buy-back or sale of Shares transaction;
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3. the buy-back or sale of Shares must be made through the Exchange; unless the purpose
of buying Treasury Shares is to finance share swap transactions for acquiring a
company or an asset; and
4. the buy-back or sale of Shares must not be executed within the first half an hour of the
start of the trading session or within the last half an hour preceding the closing of the
trading session on the Exchange.
Article eighteen:
If the buy-back transaction is made through a private transaction, a non-listed Company must
provide sufficient information to its shareholders in relation to the terms of the buy-back
offer, the time allowed and sale of Shares process, and must allow all shareholders a fair
opportunity to offer their Shares.
Article nineteen:
A Company shall not buy-back its Shares except from any “Distributable Profits” or through
external sources of financing, provided that the total amount of Distributable Profits exceeds
the total amount of external sources of financing.
Article twenty:
If the purpose of a Company’s buy-back of its Shares is to decrease its share capital, the
provisions of Article 148 of the Companies Law must be taken into consideration.
Part Two
Effect of a Buy-back Transaction
Article twenty one:
If a Company buys-back its Preferred Shares, these shares are deemed cancelled upon
completion of the buy-back transaction and the Company must then take all necessary legal
steps to amend its bylaws to reflect such changes.
Article twenty two:
Any Treasury Shares not resold, cancelled or allocated to employees in an Employees’ Share
plan within two years from the date such Shares were bought-back, are deemed cancelled.
For the purpose of calculating such period, any sale of Treasury Shares is deemed to be a sale
of the oldest Purchased Shares.
Article twenty three:
A Company may not increase its share capital through a rights issue if it owns Treasury
Shares.
Article twenty four:
If a Company which owns Treasury Shares increases its share capital through a capitalisation
issue, it shall have rights similar to those of other shareholders with respect to such Shares. In
8
addition, a Company may not undertake a capitalisation issue if it owns Shares of a certain
class that it intends to cancel.
Part Three
Rules of Sale and Pledge of Treasury Shares
Article twenty five:
A Company may sell its Treasury Shares if so provided in its bylaws and in accordance with
the following rules:
1. the sale of Shares transaction must not exceed 5% of the total Purchased Shares of the
same class;
2. the sale of Shares transaction must be approved by the Board;
3. a listed Company must notify the Authority and the public of the resolution approving
the sale of Shares on the Exchange, within [  ] days; and
4. for a listed Company, the selling price must not be less than 5% of the closing price
on the day preceding the day the sale transaction is executed.
Article twenty six:
Shareholders of a non-listed Company shall, upon issuance of the Board resolution approving
the sale of Treasury Shares for cash, have priority to purchase such Shares, in proportion to
their ownership in the Company’s paid-up capital, during the period determined by the
Board.
Article twenty seven:
A Company may pledge its Shares as security for a debt owed to a third party, if so provided
and permitted in its bylaws, in accordance with the following rules:
1. the pledge must benefit the Company and its shareholders;
2. the pledge must not adversely and materially affect the Company’s financial position
and indebtedness;
3. the Company must satisfy the Solvency Requirements;
4. the extraordinary General Assembly must approve the Share pledge transaction, and a
pre-approval may be granted for several transactions; and
5. the pledge must not result in a breach of the Companies Law and any other relevant
rules and regulations.
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Part Four
Shares allocated to Employees
Article twenty eight:
If a Company is buying-back its Shares for the purpose of allocating them to its employees
within an Employees’ Shares plan, the Company must, in addition to the other requirements
of a share buy-back, comply with the following conditions:
1. The Company’s bylaws must provide and permit that;
2. obtain the extraordinary General Assembly’s approval on the Employees’ Shares
plan, after disclosing all the terms of the plan and the allocation price for each Share
offered to employees if offered for consideration; and
3. non-executive Board members shall not participate in the Employees’ Shares plan and
executive Board members shall not vote on Board resolutions relating to the plan.
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Chapter Five
Pledge of Joint Stock Companies’ Shares
Part One
Share Pledge Rules
Article twenty nine:
Without prejudice to other related laws and regulations, anyone who has the right to own
Shares of a Company may take a pledge over Shares in accordance with the rules set forth in
this Chapter.
Article thirty:
A shareholder of a Company may pledge some or all of his/her Shares, in accordance with
the following rules:
1. obtaining all regulatory approvals necessary to create the pledge; and
2. the pledge agreement between the pledging shareholder and pledgee creditor must
comply with the rules set forth in Part Two of this Chapter.
Part Two
Pledge Agreement and its Registration
Article thirty one:
A. A pledge of Shares of a listed Company is created pursuant to a written or an
electronic agreement between the pledging shareholder and the pledgee creditor,
which shall include all information provided for in the Depository Centre Rules.
B. A pledge over Shares of a listed Company is recorded, registered and released in
accordance with the provisions of the Depository Centre Rules.
Article thirty two:
A. A pledge of Shares of a non-listed Company is created pursuant to a written or an
electronic agreement between the pledging shareholder and the pledgee creditor, and
must include the following information:
1. names and addresses of the pledging shareholder and pledgee creditor;
2. number and value of the pledged Shares, name of the Company issuing such
Shares and its commercial registration number;
3. the amount of the debt secured by the pledge or the maximum debt amount
permitted by it;
4. date of the pledge agreement;
5. conditions and terms of releasing the pledge; and
6. any other conditions agreed upon by both parties.
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B. A pledge over Shares of a non-listed Company is registered and released pursuant to
the following:
1. Each of the pledgee creditor and pledging shareholder must submit the form of
pledge application addressed to the chairman of the Board if the Company is the
party preparing and maintaining the Shareholders Register or to the representative
of the party entrusted by the Company to prepare and maintain the Shareholders
Register and which shall contain the following information and be authenticated
by the chamber of commerce and industry or any of the banks operating in the
Kingdom or any of the Authorised Persons licensed by the Authority or any of the
Saudi consulates, if either the pledging shareholder or the pledgee creditor is
incorporated outside of the Kingdom:
A. Form of pledge application from the pledgee creditor in the form set out in
Annex (1), including the following:
-
name of the pledging shareholder whose Shares will be pledged to the
benefit of the pledgee creditor;
-
number of the investment portfolio in which the Shares to be pledged are
deposited, if any;
-
name of the Company which issued the Shares;
-
number of Shares to be pledged;
-
date of commencement of the pledge which shall not precede the date of
the pledge agreement and if no date is specified, the date of registration of
the pledge by the Company in its Shareholders Register or by the party
entrusted to prepare and maintain the Shareholders Register (including the
Exchange) shall be considered as the date of commencement of the pledge;
-
The term of the pledge, if any; and
-
determining the portion of dividends distributed either in cash or granted
as bonus Shares to the pledging shareholder or pledgee creditor.
B. Form of pledge application from the pledging shareholder in the form set out
in Annex (2) including the following:
-
name of the pledgee creditor to the benefit of whom the Shares will be
pledged;
-
the name of the Company issuing the Shares and its commercial
registration number;
-
number of shares to be pledged;
-
date of commencement of the pledge which shall not precede the date of
the pledge agreement and if no date is specified, the date of registration of
the pledge by the Company in its Shareholders Register shall be
considered as the date of commencement of the pledge;
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-
The term of the pledge, if any; and
-
determining the portion of dividends distributed either in cash or granted
as bonus Shares to the pledging shareholder or pledgee creditor.
2. The pledge is registered in the Shareholders Register prepared and maintained by
the Company or by the party entrusted to prepare and maintain the Shareholders
Register (including the Exchange).
3. The share certificates of the pledged Shares, if any, shall contain a notation in
respect of the pledge and name of the pledgee creditor.
4. The pledge shall be released upon expiry of the pledge’s term, if any, or by virtue
of the form of pledge release application in the form set out in Annex (3)
addressed by the pledgee creditor to the chairman of the Board if the Company is
the party preparing and maintaining the Shareholders Register or to the
representative of the party entrusted by the Company to prepare and maintain the
Shareholders Register (including the Exchange) which shall be authenticated by
any of the entities referred to in Paragraph 1 of this Article, and shall evidence the
pledgee creditor’s consent to release and remove any notation from the pledged
shares.
Article thirty three:
A share pledge shall have no legal effect towards third parties unless it is recorded with the
Depository Centre if the pledged Shares are issued by a listed Company and in the
Shareholders Register if the pledged Shares are issued by a non-listed Company.
Article thirty four:
Unless otherwise provided for in the pledge agreement, the pledgee creditor may receive the
profits resulting from the pledged Shares and may enjoy all rights attached to them.
Article thirty five:
Without prejudice to Article 34 of these rules, the pledgee creditor shall not be permitted to
attend or vote at the meetings of the General Assembly.
Part Three
Selling and Foreclosing the Pledge
Article thirty six:
A. The foreclosure of pledged Shares of listed and non-listed Companies shall be made
in accordance with the Enforcement Law and related rules issued pursuant to it in
addition to other relevant regulations and rules, without prejudice to the provisions of
Article 8 of the Companies Law.
B. An Authorised Person may foreclose on Shares deposited for its benefit or Shares
available in its customer’s portfolio as a guarantee for the margin lending granted to
the customer through directly selling them on the Exchange, in accordance with the
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relevant applicable rules and the margin lending agreements entered into between
both parties.
Part Four
General Provisions
Article thirty seven:
It is not permitted to record more than one pledge over any Shares subject to a pledge,
whether issued by a listed or non-listed Company.
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Chapter Six
Issuance, Buy-Back and Conversion of Preferred Shares by Joint Stock Companies
Part One
Rules of Issuance, Buy-Back and Conversion of Preferred Shares
Article thirty eight:
The Company must observe Shari’ah provisions when issuing Preferred Shares.
Article thirty nine:
The Company may issue or buy-back Preferred Shares, convert ordinary Shares into
Preferred Shares or convert Preferred Shares into ordinary Shares, in accordance with the
following rules:
1) the Company’s bylaws must provide for it and permit it;
2) obtain the extraordinary General Assembly’s approval;
3) obtain the approval of holders of Preferred Shares convened in a special assembly if
the resolution relates to converting Preferred Shares into ordinary Shares or amending
the rights of any holders of such Shares;
4) the percentage of Preferred Shares issued by a listed Company must not, at any time,
exceed [  ] of the Shares owned by the public;
5) the Preferred Shares must not exceed [  ]% of the Company’s share capital;
6) the Company’s share capital must be fully paid; and
7) the issuance of Preferred Shares by the Company must not result in the violation of
any other relevant laws or regulations.
Article forty:
a) Special assemblies of holders of Preferred Shares must be held in accordance with
Articles 90, 91 and 92 of the Companies Law, in addition to the following rules:
1) Meetings of special assemblies of holders of Preferred Shares of a certain class,
shall only be valid if attended by shareholders representing half of the number of
Preferred Shares of such same class, unless the Company’s bylaws provide for a
higher percentage.
2) If the quorum for a special assembly meeting specified in sub-paragraph (1) of
this paragraph is not met, a second meeting shall be convened to be held in the
same conditions provided for in Article 91 of the Companies Law. However, a
second meeting may be held one hour after the time of the first meeting, provided
that the meeting notice includes a statement on the possibility of holding such
meeting. In all cases, the second meeting shall be valid if attended by holders of
Preferred Shares representing a quarter of the number of Preferred Shares of the
same class.
15
3) If the quorum for the second meeting is not met, a third meeting shall be convened
to be held in the same conditions provided for in Article 91 of the Companies
Law. The third meeting shall be valid regardless of the number of Preferred
Shares of the same class represented therein, subject to obtaining the approval of
the Competent Authority.
4) Resolution of special assemblies of holders of Preferred Shares shall be passed by
the majority of two-thirds of the number of Preferred Shares of the same class
represented in the meeting.
b) The provisions of Chapter 3 relating to holding of General Assembly meetings and
shareholders’ participation therein through contemporary technology and Chapter 10
relating to proxy rules for attending general or special assemblies shall also apply to
special assemblies of holders of Preferred Shares.
Article forty one:
Preferred Shares shall not grant its holders the right to vote in General Assemblies unless the
Company fails for three consecutive years to pay to holders of such Shares the specified
percentage of the Company’s net profits after setting aside the statutory reserve.
Article forty two:
If the General Assembly resolution results in amending the rights of holders of Preferred
Shares, including the liquidation of the Company or conversion of Preferred Shares into
ordinary Shares or vice-versa, such resolution shall not be effective unless ratified by holders
of Preferred Shares allowed to vote in a special assembly.
Article forty three:
If the Company fails to pay holders of Preferred Shares the specified percentage of the
Company’s net profits after setting aside the statutory reserve for three consecutive years, the
special assembly of holders of Preferred Shares, held in accordance with the provisions of
Article 89 of the Companies Law, may resolve either to allows them to attend the Company’s
General Assembly and participate in voting, or to appoint representatives thereof in the Board
in proportion to the value of their Shares in the share capital, until the Company is able to pay
all profits allocated to holders of such Shares from all previous years.
Each Preferred Share shall have one vote in the General Assembly, and the holder of a
Preferred Share may, in this case, vote on all agenda items of the General Assembly without
any exceptions.
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Chapter Seven
Sale of Shares through Public Auction or the Exchange in case of Failure of a Shareholder to
Pay the Value of the Shares On time
Article forty four:
A shareholder in a non-listed Company shall, upon the first request by the Board through
registered mail, pay the remaining value of a Share within a maximum period of fifteen (15)
days. If a shareholder fails to make such payment on time, the Board may, after informing the
shareholder through the means specified in the Company’s bylaws or through registered mail,
sell the Share through public auction in accordance with the Enforcement Law and other
relevant laws.
Article forty five:
Amounts due to the Company shall be satisfied from the sale proceeds and the balance shall
be returned by the Company to the shareholder. If the sale proceeds are not sufficient to cover
the due amount, all of the shareholder’s assets may be applied by the Company towards
satisfaction of the balance.
Article forty six:
A shareholder who fails to make the required payment may, up to the day of the sale, pay the
amount due in addition to the expenses incurred by the Company in this regard.
Article forty seven:
The listing of any Company on the Exchange, requires that the value of all its Shares be fully
paid-up.
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Chapter Eight
Dividends Distribution to Shareholders of Joint Stock Companies
Part One
Timing of Payment of Dividends
Article forty eight:
The Board must implement any General Assembly resolution with respect to dividends
distribution to shareholders within seven (7) days from the date such resolution or the
Board’s resolution for the distribution of interim dividends, is issued.
Part Two
Interim Dividends Distribution
Article forty nine:
A Company which enjoys a regular positive profitability and reasonable liquidity, and is able
to reasonably foresee the scale of its profits, may distribute interim dividends to its
shareholders on a biannual or quarterly basis, if its financial capabilities allows it.
Article fifty:
The Company wishing to distribute interim dividends to its shareholders must comply with
the following rules:
1. the Company must have cumulative retained earnings or contractual reserves from
one or more previous years of not less than twelve months each, sufficient to cover
the proposed dividend distribution;
2. the realised profits during the different periods of the financial year in which
dividends are to be distributed, after deducting sufficient provisions to cover the
estimated requirements of statutory reserves, zakat and tax, must be sufficient to
cover such distribution, and the likelihood of maintaining such profits until the end of
the Company’s financial year must be highly reasonable; and
3. the Company’s financial position and available liquidity must allow for such
distribution.
Article fifty one:
The Board must include in its annual report submitted to the General Assembly of the
Company the portion of dividends distributed to shareholders during different periods of the
financial years in addition to the portion of dividends proposed for distribution at the end the
year, and the aggregate dividend amounts.
Article fifty two:
a) Dividend distributions must be recorded to the cumulative retained earnings account
of preceding years, or the contractual reserves, or both. The Company must take a
sequential and consistent approach in determining the manner and percentage of
dividend distributions in light of the Company’s capabilities and available liquidity.
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The Board must disclose and announce the portion of regular interim dividends
approved for distribution to the shareholders on the specified dates to ensure that
shareholders are informed of such dividends and are able to review them.
b) Joint stock Companies must, upon resolving to distribute interim dividends, disclose
and announce such resolution, and provide the Competent Authority with a copy
thereof.
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Chapter Nine
Issuance and Sale of Rights Issues Resulting from Capital Increase
Part One
Definition of Rights Issues
Article fifty three:
Rights Issues are tradable securities which grant their holder the right to subscribe for new
cash Shares offered upon the extraordinary General Assembly’s approval of the capital
increase through the issuance of new cash Shares. Each right issue grants its holder the right
to subscribe for one new Share at the offer price.
Article fifty four:
After the extraordinary General Assembly’s approval of the capital increase through a rights
issue, the price of the Share is adjusted by the Exchange, and the rights issues are deposited
as securities in the portfolios of the Registered Shareholders based on their eligibility and in
proportion to the percentage they each own in the share capital, within a maximum of two (2)
days from the date of the extraordinary General Assembly meeting. The rights issues will
appear in the portfolios of Registered Shareholders under a new symbol that designates these
rights, and cannot be traded until the beginning of the trading period and subscription. The
value of such rights issues will not appear in the Registered Shareholders’ portfolios before
the trading period, however, only the number of pre-emptive rights will appear. The
Exchange will regularly calculate and publish an indicative value on its website during the
period for trading of rights issues.
Part Two
Process of Trading of Rights Issues
Article fifty five:
The process of trading of rights issues include the following steps:
1) Period for trading of rights issues:
The period for trading of rights issues shall continue for eight (8) working days
(trading days), in which Registered Shareholders and non-registered shareholders may
trade rights issues. The trading period shall be determined in the prospectus and
announcements of the issuing Company.
2) The relevant prospectus shall clarify subscription periods and procedures
relating to new Shares.
3) Rump Offering Period (if any):
a) If there Shares that are unsubscribed for during the first and second subscription
period (rump Shares) or fractional Shares (if any), such Shares shall be offered at
a minimum at the offer price to a number of institutional investors who shall
submit their offers to purchase the rump Shares. Shares will be allocated to
institutional investors in order of the offer price for the Shares received, with the
rump Shares allocated first to the institutional investor with the highest offer, and
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will be allocated proportionately to institutional investors that tendered at the
same price.
b) The subscription price of the rump Shares shall be not less than the offer price
during that period.
c) If the price of rump Shares is higher than the offer price, the difference (if any)
shall be distributed, after deducting the subscription monies and expenses, as a
compensation to holders of rights issues, whether they are Registered
Shareholders or new investors who purchased the rights issues and did not
subscribe for their rights issues or did not sell their pre-emptive rights in
proportion to the rights issues they own.
4) Allocation of shares to subscribers:
The prospectus shall determine the period of allocation of Shares to subscribers, and
the date of transferring the compensation (if any).
Part Three
Options Available to Registered Shareholders and New Investors
Article fifty six:
a) A Registered Shareholder shall have the following options:
1) Exercise its right to subscribe for the entire rights issues deposited in its portfolio
to maintain its shareholding percentage in the Company.
2) Sell the rights issues deposited in its portfolio or part thereof through the
Exchange and receive the consideration for such entire or partial sale.
3) Purchase additional rights issues through the Exchange, and all purchasers shall
have the right to subscribe for the Shares during the second subscription period.
4) Maintain its rights issues without any change, whether by selling them or
exercising the right to subscribe for them, and in this case, the rump Shares
resulting from not exercising such rights issues or selling them shall be offered
during the rump offering period. The Registered Shareholder may not receive any
consideration for such rights issues if the sale occurs in the rump offering period
at the offer price.
b) If a Registered Shareholder subscribes then sells the rights issues, and a number of
rights issues amounting to the number of rights issues he subscribed for is not
purchased before the end of the trading period, the subscription application shall be
rejected entirely (in the event of selling all rights issues) or partially, in proportion to
the rights issues sold, and the rejected subscription monies shall be returned by the
receiving agent to the Registered Shareholder.
Article fifty seven:
A new investor may purchase rights issues during the trading period and subscribe for such
rights during the second subscription period. If it does not subscribe for such issues before the
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end of the second subscription period, the rump Shares resulting from not exercising such
rights or selling them shall be offered during the rump offering period.
Part Four
Rights’ Indicative Value
Article fifty eight:
The indicative value of the rights shall reflect the difference between the market value of the
Company’s Shares during the trading period and the offer price regularly calculated and
published by the Exchange on its website during the trading period. The indicative value may
also be published on websites of market information providers to enable investors to view the
indicative value upon entering orders.
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Chapter Ten
Proxy Procedures for Attending General or Private Assemblies
Article fifty nine:
a) A shareholder in a joint stock Company may authorise, pursuant to a written proxy
letter, another natural person, either from shareholders of the Company or others,
provided that he is not a Board member or employee of the Company, to attend the
General Assembly or special assembly meetings and vote on its agenda items on its
behalf. Such proxy letter must be in accordance with the proxy form attached to the
meeting notice issued by the Company, which shall be in the form set out in Annex
(4) and shall include the following information:
 full name of the authorising shareholder if he is a natural person, or its name
according its commercial registration, or equivalent, if it is a legal person;
 name of the Company according to its commercial registration;
 national ID number if the shareholder is a natural person, or commercial
registration number if it is a legal person, or equivalent;
 full name and national ID number of the proxy;
 name and capacity of the proxy letter signatory, provided that a copy of the legal
power of attorney is attached if the signatory is a legal agent;
 date of proxy letter and period of validity; and
 type of assembly meeting for which the proxy letter is granted.
b) Notwithstanding paragraph (a) of this Article, a shareholder may authorise another
person, from shareholders of the Company or others, provided that he is not a Board
member or employee of the Company, to attend the General Assembly or special
assembly meetings on its behalf pursuant to a legal power of attorney, provided that
such power of attorney shall explicitly state the representative’s right to attend
General Assembly and special assembly meetings of joint stock companies, as may be
appropriate, and vote on its agenda items.
c) The original copy of the certified proxy letter, or original legal power of attorney (as
applicable), must be presented and a copy thereof may not be accepted.
Article sixty:
a) A shareholder who is a Saudi natural person or resident in the Kingdom, or a legal
person duly established in the Kingdom, must attest its proxy letter by any of the
following authorities:
1) chambers of Commerce and Industry if the shareholder is a member of the same, a
company, or a legal entity;
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2) a licensed bank or Authorised Person in the Kingdom, provided that the
authorising shareholder holds an account with the attesting bank or Authorised
Person; or
3) attorneys licensed for attesting in accordance with the attestation law.
b) A shareholder who is a legal person established outside the Kingdom may send a
proxy letter to the Company, attested by the Kingdom’s diplomatic authority and
embassy in its country and the Saudi Ministry of Foreign Affairs, specifying its
representatives who have the right to attend the Company’s General Assembly and
special assembly meetings on its behalf. Such proxy letter must be sent to the
Company within the first three (3) months of the financial year or within one (1)
month from the date of acquiring Shares in the Company. Such letter shall be deemed
an official proxy letter which allows such representatives to attend General Assembly
and special assembly meetings held within one (1) year from the date of the proxy
letter.
Article sixty one:
The Company’s bylaws may determine a maximum number of votes that a person may hold
for several Shares in proxy. If the Company’s bylaws do not include such limitation, a proxy
may accept more than one proxy letter from the Company’s shareholders, attend meetings
and vote on their behalf regardless of the number of votes he represents in a meeting.
Article sixty two:
Without prejudice to paragraph (b) of Article 59, a proxy letter must be to a specific General
Assembly or special assembly meeting. Such proxy shall be valid if a meeting is adjourned to
a second or third meeting for failure to reach the quorum of the first meeting to which the
proxy letter was issued.
Article sixty three:
A shareholder who wishes to attend the Company’s General Assembly or special assembly
meeting using contemporary technology may not authorise another person to attend the
meeting in any other way.
Article sixty four:
The shareholder or its proxy must deliver the original copy of the proxy letter to the
Company at least two days prior to the assembly meeting. A committee of the Company’s
employees and representatives of the Ministry and the Authority must be formed to sort the
provided proxy letters and confirm the accuracy and completeness of information at least one
day prior to the meeting, if possible.
Article sixty five:
Any proxy letter issued in violation of these rules must be excluded and considered void,
except for violations to the timing of submitting the proxy letter if it is completed before
counting the votes.
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Annex (1)
Form of Pledge Application from the Pledgee Creditor
[The text of the form containing a list of all information and documentation required to
submit a pledge application will be included ]
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Annex (2)
Form of Pledge Application from the Pledging Shareholder
[The text of the form containing a list of all information and documentation required to
submit a pledge application will be included]
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Annex (3)
Form of pledge release Application
[The text of the form containing a list of all information and documentation required to
submit a pledge release application will be included]
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Annex (4)
Proxy Form
[The text of the proxy form required to attend General Assembly meetings will be included]
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